Group QUARTERLY REPORT ON OPERATIONS AT MARCH 31st, 2009

Transcription

1 Group QUARTERLY REPORT ON OPERATIONS AT MARCH 31st, 2009

2 TABLE OF CONTENTS Company s data... 1 Corporate Governance bodies... 2 TOD S Group... 3 Group s organizational chart... 4 Distribution network as of... 5 Key consolidated financial figures... 6 Highlights of results... 7 Report on operation Group s activity... 9 Group s brands... 9 Foreign currency markets...10 Principal events and transactions during the period...10 Group s results in Q Significant events occurring after the end of the period...17 Business outlook...17 Guidelines for preparation of the Quarterly Report...17 Accounting policies...17 Alternative indicators of performances...18 Scope of consolidation...19 Transactions with related parties...19 Declaration pursuant to Article 154bis(2) of the Consolidated Law on Financial Intermediation...20 Table of contents

3 Company s data Registered office TOD S S.p.a. Via Filippo Della Valle, Sant'Elpidio a Mare (Fermo) - Italy Tel Legal data Parent company Share capital resolved euro 61,218,802 Sahare capital subscribed and paid euro 61,218,802 Fiscal Code and registration number on Company Register of Court of Fermo: Registered with the Chamber of Commerce of Fermo under n R.E.A. Offices e Show rooms Dusseldorf Kaistrasse, 2 Hong Kong Three Pacific Place, 1 Queen s Road East London Old Bond Street, 16 Milan - Corso Venezia, 30 Milan - Via Savona, 56 Milan - Via Serbelloni 1-4 New York - 450, West 15 th Street Paris Rue Royale, 20 Tokyo Omotesando Building, Jingumae Production facilities Comunanza (AP) - Via Merloni, 7 Comunanza (AP) - Via S.Maria, Sant'Elpidio a Mare (AP) - Via Filippo Della Valle, 1 Bagno a Ripoli, Loc. Vallina (FI) - Via del Roseto, 60 Bagno a Ripoli, Loc. Vallina (FI) - Via del Roseto, 50 Tolentino (MC) - Via Sacharov 41/43 1 Company s data

4 Corporate Governance bodies Board of directors (1) Diego Della Valle Chairman Andrea Della Valle Vice- Chairman Luigi Abete Maurizio Boscarato Luigi Cambri Luca Cordero di Montezemolo Emanuele Della Valle Fabrizio Della Valle Emilio Macellari Pierfrancesco Saviotti Stefano Sincini Vito Varvaro Executive Committee Diego Della Valle Chairman Andrea Della Valle Fabrizio Della Valle Emilio Macellari Stefano Sincini Vito Varvaro Compensation Luigi Abete Chairman Committee Luigi Cambri Pierfrancesco Saviotti Internal Control and Maurizio Boscarato Chairman Corporate Governance Luigi Cambri Committee Pierfrancesco Saviotti Board of statutory (2) Enrico Colombo Chairman Auditors Gian Mario Perugini Acting stat. auditor Fabrizio Redaelli Acting stat. auditor Massimo Foschi Substitute auditor Gilfredo Gaetani Substitute auditor Independent Auditors (3) Manager charged with preparing a company s financial report Deloitte & Touche S.p.a. Rodolfo Ubaldi (1) Term of the office: (resolution of the Shareholders meeting as of April 20 th, 2009) (2) Term of the office: (resolution of the Shareholders meeting as of April 27 th, 2007) (3) Term of the office: (resolution of the Shareholders meeting as of April 28 th, 2006) 2 Corporate Governance bodies

5 TOD S Group TOD S S.p.a. Parent Company, owner of the TOD S, HOGAN and FAY brands and licensee of the ROGER VIVIER brand. Del.Com. S.r.l. Subholding for operation of national subsidiaries. TOD S International B.V. Subholding for operation of international subsidiaries and DOS in The Netherlands. An.Del. Usa Inc. Subholding for operation of subsidiaries in the United States. Del.Pav S.r.l. Company that operates DOS in Italy. Deva Mode S.r.l. Company that operates DOS in Italy. Filangieri 29 S.r.l. Company that operates DOS in Italy. Re.Se.Del. S.r.l. Company for services. Spiga 22 S.r.l. Company that operates DOS in Italy. Via Roma 40 S.r.l. Company that operates DOS in Italy. Gen.del. SA Company that operates DOS in Switzerland. TOD S Belgique S.p.r.l. Company that operates DOS in Belgium. TOD S Deutschland Gmbh Company that distributes and promotes products in Germany and manages DOS in Germany. TOD S Espana SL Company that operates DOS in Spain. TOD S France Sas Company that distributes and promotes products in France and manages DOS in France. TOD S Hong Kong Ltd Company that distributes and promotes products in Far East and South Pacific and manages DOS in Hong Kong. TOD S Retail India Private Ltd Company that operates DOS in India TOD S Japan KK Company that operates DOS in Japan. TOD S Korea Inc. Company that promotes products in Korea TOD S Luxembourg S.A. Company that operates DOS in Luxembourg. TOD S Macao Ltd Company that operates DOS in Macao. TOD S Saint Barth Sas Not operating company TOD S (Shanghai) Trading Co. Ltd Company that operates DOS in China TOD S Singapore Pte Ltd Company that operates DOS in Singapore. TOD S UK Ltd Company that operates DOS in Great Britain. Webcover Ltd Company that operates DOS in Great Britain. Cal.Del. Usa Inc. Company that operates DOS in California (USA). Colo. Del. Usa Inc. Company that operates DOS in Colorado (USA). Deva Inc. Company that distributes and promotes products in North America, and manages of DOS in New Jersey (USA). Flor. Del. Usa Inc. Company that operates DOS in Florida (USA). Hono. Del. Inc. Company that operates DOS in Hawai (USA). Il. Del. Usa Inc. Company that operates DOS in in Illinois (USA). Neva. Del. Inc. Company that operates DOS in Nevada (USA). Or. Del. Usa Inc. Company that operates DOS in California (USA). TOD S Tex. Del. Usa Inc. Company that operates DOS in Texas (USA) Sandel SA Not operating company Un.Del. Kft Production Company 3 TOD S Group

6 Group s organizational chart TOD S S.p.a. Gen.Del. SA Zurich Switzerland S.C. Chf 200,000 TOD S International BV Amsterdam The Netherlands S.C. - Euro 2,600,200 1% 99% TOD S Hong Kong Ltd Hong Kong S.C. - Usd 50,000 TOD SUK Ltd London Great Britain S.C. - Gbp 350,000 TOD S (Shanghai) Trading Co. Ltd Shanghai- China S.C. USD 6,000,000 10% 1% 50% 1% 50% TOD S Belgique S.p.r.l. Bruxelles - Belgium S.C. - Euro 300,000 TOD SJapan KK Tokio - Japan S.C. - Jpy 100,000,000 TOD S Saint Barth Sas Saint Barthélemy S.C. - Euro 500,000 Un.Del Kft Tata - Hungary S.C. - Huf 42,900,000 TOD S Macao Lda Macao S.C. Mop 850,000 TOD S India Retail Private Ltd Mumbai India S.C. INR 113,900,000 90% 99% 50% Webcover Ltd London Great Britain S.C. - Gbp 1,000 TOD S Espana SL Madrid Spain S.C. - Euro 468, TOD S Korea Inc Seoul - Korea S.C. Won 100,000,000 TOD S Singapore Ltd Singapore S.C. - Sgd 300,000 TOD S Luxembourg S.A. Luxembourg S.C. Euro 31, Sandel SA San Marino S.C. - Euro An.Del. USA Inc. New York U.S.A. S.C. - Usd 3,700,000 Cal.Del. USA Inc. Beverly Hills, Ca U.S.A. S.C. - Usd 10,000 Colo.Del. USA Inc Denver, Co U.S.A. S.C. - Usd 10,000 Deva Inc. Wilmington, DE U.S.A. S.C. - Usd 500,000 Flor.Del. USA Inc. Tallahassee, Fl U.S.A. S.C. - Usd 10,000 Hono.Del. Inc. Honolulu, Hi U.S.A. S.C. - Usd 10,000 Il.Del. USA Inc. Springfield, Il U.S.A. S.C. - Usd 10,000 Neva.Del. Inc. Carson City, Nv U.S.A. S.C. - Usd 10,000 Or.Del. USA Inc. Sacramento, Ca U.S.A. S.C. - Usd 10,000 TOD S Tex. Del. Inc. Dallas, Tx U.S.A S.C. - Usd 10,000 Del.Com S.r.l. S.Elpidio a Mare - Italy S.C. - Euro 31,200 Deva Mode S.r.l. S.Elpidio a Mare - Italy S.C. - Euro 50,000 Spiga 22 S.r.l. S.Elpidioa Mare - Italy S.C.. - Euro 50,000 Via Roma 40S.r.l. S.Elpidio a Mare - Italy S.C.. - Euro 50,000 Del.Pav. S.r.l. S.Elpidio a Mare - Italy S.C. - Euro 50,000 50% 50% TOD S France Sas Paris - France S.C. - Euro 780,000 TOD SDeutschland Gmbh Dusseldorf - Germany S.C. - Euro 153, Re.Se.Del. S.r.l. S.Elpidioa Mare - Italy S.C. - Euro 25,000 Filangieri29 S.r.l. S.Epidio a Mare- Italy S.C. - Euro 100,000 4 TOD S Group

7 Distribution network as of USA (D) (F) U.S.A. 14 RoW (D) (F) saudi Arabia 1 Baharain 1 United Arab E. 4 Kuwait 1 Lebanon 2 Qatar 1 Total 10 Europe (D) (F) Italy 37 9 Belgium 1 France 11 Germany 9 Great Britain 5 1 Greece 0 6 Luxembourg 1 Netherlands 1 Portugal 1 Russia 2 Spain 1 1 Switzerland 3 Turkey 1 Total Asia (D) (F) Japan 28 1 China 17 5 Korea 7 8 Philippines 2 Hong Kong 8 1 India 3 Indonesia 3 Macao 1 1 Malaysia 2 Singapore 3 1 Taiwan 13 Thailandia 3 U.S.A. 1 Total (D)=DOS (F)=FRANCHISING DOS, 2009 new openings Far East Busan (Korea) Franchising, 2009 new openings Europa Malaga Middle East Manama (Spain) (Baharain) For a complete list of retail outlets operated by the DOS and franchising network, reference should be made to the corporate web site: 5 Distribution network

8 Key consolidated financial figures Q1 09 Revenues - % by brand P&L key figures (in euro mn) HOGAN 37.0% FAY 12.5% Roger Vivier 1.9% Altro 0.1% Q Q Q Q Revenues EBITDA % % % % EBIT % % % % TOD'S 48.5% Q1 09 Revenues - % by region Key Balance Sheet figures (in euro mn) Europe 23.1% RoW 13.5% North Am. 5.5% Net working capital (*) Net financial position Capital expenditures Italy 57.9% (*) Trade receivables + inventories trade payables.1% Q1 09 Revenues - % by product Stock performance Leather goods 15.7% Appar. 12.3% In Euro Shoes 71.9% January-March Group employees BLC 30% EX 2% The Group employees Year to date 2,838 2,814 2,664 2,388 WHC 68% EX = executives WHC = white collar employees BLC = blue collar employees 6 Key financial figures

9 Highlights of results Revenues: these totalled million euro during the period (the foreign exchange effect was a negative 1 million euro), for growth of 5.4% over the first three months of Sales on the DOS network totalled 74.1 million euro (+4.9%). Revenues (in euro mn) EBITDA: 45.7 million euro. On a comparable exchange rate basis, EBITDA would have been 47.7 million euro (+8.9%), for a ROS of 23.8% (Q1 2008: 22.9%). Q comp. ex. rates basis 47.7 Q Q Q Q EBITDA (in euro mn) EBIT: 37.9 million euro, 40.1 million on a comparable exchange rate basis (+7.8%). Q comp. ex. rates basis Q Q Q Q Net financial position (NFP): the Group s cash and EBIT (in euro mn) bank accounts totalled 85.3 million at March 31 st At the same date, net financial position was Capital expenditures: these totalled 6.1 million euro in the first three months of 2009, with over 60% being invested in the distribution network. Q comp. ex. rates basis Q Q Q Q NFP (in euro mn) 97.0 Distribution network: at March 31 st, the 80.7 monobrand distribution network was comprised of 150 DOS and 72 franchised stores Key financial figures

10 Group REPORT ON OPERATION

11 Group s activity The TOD S Group operates in the luxury sector under its proprietary brands (TOD S, HOGAN, and FAY) and licensed brands (ROGER VIVIER e DEREK LAM). It actively creates, produces and distributes shoes, leather goods and accessories, and apparel. The company s mission is to offer top-quality products that satisfy the practical demands and desires of consumers worldwide. Group s brands The TOD S brand is positioned on the luxury market and combines tradition, top quality and modernity. It offers consumers shoes, leather goods, accessories and apparel whose design is exclusive, functional and never ostentatious, interpreting timeless elegance. TOD S products embody the high quality of goods Made in Italy that are handcrafted for daily use while offering a sophisticated and elegant look. Certain products, such as the Driving Shoe or the D-Bag, beloved by celebrities and leaders around the world, have become icons representing a unique and recognisably elegant style for men and women. The HOGAN brand is positioned in the dynamic urban luxury market, offering consumers contemporary style shoes, leather goods, accessories and apparel with an international vision. HOGAN products, which are distinguished by their innovative character and high quality, have created a unique style, contributing to changes in the fashion habits of consumers who want a functional, comfortable, but also sporty and elegant product for everyday life. HOGAN products are trend-setters in defining an elegant and sporty look. Some of its models are best sellers, such as its Interactive shoes. This brand offers consumers a line of high-quality apparel that is distinguished by the technical treatment of fabrics, obsession for detail and extreme functionality, combining style and quality with excellence. FAY products can be worn everywhere: from the sports stadium to the office, and from the city to the countryside. In every season, the FAY collection offers innovative, recognisable products for men, women and children. 9 Report on operation

12 Foreign currency markets After the sharp correction in cross rates during H2 2008, exchange rates trends were much more linear in Q1 2009, with less marked fluctuations. Compared with its average levels for Q1 2008, the euro was generally weaker against nearly all non- EU currencies, although it did continue appreciating against the British pound and Korean won. Principal events and transactions during the period No events or transactions took place during the first three months of 2009 as to impact the assets, liabilities, operating result and financial position of TOD S Group as reported in its Annual Report at December 31 st Given the persistent volatility on international markets, the Group maintained a prudent approach to all capital expenditure and growth decisions, while seeking to improve its own operating efficiency and streamline its costs. As compared with the first three months of the previous financial year, the current economic situation (Q1 2009) includes the retail activities of continental China, reflecting the changes implemented in FY 2008 (17 DOS compared with the four that existed at March 31 st 2008), and India. These new activities did not have a material impact on Group s operations. Group s results in Q In the first three months of 2009, TOD S Group sales totalled million euro, or 10.4 million euro, 5.4% from the same period of On a comparable exchange rate basis, revenues would be million euro, and the growth rate 4.9%. EBIT in Q was 37.9 million euro, up 0.7 million euro. The foreign exchange difference for the period had a negative impact on quarterly EBIT: on a comparable exchange rate basis (average of exchange rates reported in Q1 2008), EBIT would rise to 40.1 million euro, for growth of 7.8%. 10 Report on operation

13 (In Euro 000 s) FY 2008 Principal P&L indicators Q Q Change % 707,553 Sales revenues 201, ,922 10, ,204 EBITDA 45,668 43,749 1, (29,603) Deprec., amort. and write-downs (7,759) (6,521) (1,238) ,601 EBIT 37,909 37, Foreign exchange impact on revenues (1,020) Adjusted sales revenues 200, ,922 9, Foreign exch. impact on operating costs 3,010 Adjusted EBITDA 47,658 43,749 3, Foreign exchange impact on deprec./amort. 250 Adjusted EBIT 40,149 37,228 2, EBITDA % EBIT % Adjusted EBITDA % Adjusted EBIT % (In Euro 000 s) Principal Balance sheet indicators Change 248,553 Net working capital (*) 284, ,348 47,241 53,475 Net financial position 56,395 72,831 (16,436) 12,039 Capital expenditures 6,072 40,838 n.m. (*) Trade receivables + inventories trade payables Revenues. Consolidated revenues totalled million euro in Q1 2009, up 5.4% from the same period of the previous year; on a comparable exchange rate basis (average exchange rates for January-March 2008), revenues would be million euro, and the growth rate would fall to 4.9%. The change in sales on the Group s two distribution channels was substantially parallel. It must be kept in mind that results in the first quarter of every year are dominated by sales on the wholesale channel. Due to the different timing for accounting of revenues, deliveries made to the DOS channel translate into inventory entries upon consolidation, and become sales revenues only in Q2, when the products are sold by stores to end customers. 11 Report on operation

14 In Q1 2009, sales revenues third from parties totalled million euro, up 5.7% from the same period of Revenues on the DOS network totalled 74.1 million euros, up 4.9% from Q (In euro mn) Q % Q % Change % DOS WS Total WS 63.2% DOS 36.8% WS DOS WS DOS Q Q Same Store Sales Growth (SSSG), which is the global average of revenue growth rates reported by DOS existing at January 1 st 2008, was -0.4% in the first 18 weeks of the current year (January 1 st May 3 rd 2009). At March 31 st 2009, the Group s distribution network was composed of 150 DOS and 72 franchised stores, compared with 130 DOS and 62 franchised stores at March 31 st TOD S brand revenues totalled 97.5 million euro in Q1 2009, substantially unchanged from the same period a year earlier. The HOGAN brand continued to produce excellent results: sales were 74.5 million euro in Q1 2009, up 17.5% from the same period of The FAY brand also had positive results: in the first three months of 2009, revenues totalled 25.2 million euro, up 2.7% from (In euro mn) Q % Q % Change % TOD'S HOGAN FAY RV (1.2) (22.8) Other (0.6) n.s. Total RV 1.9% FAY 12.5% HOGAN 37.0% TOD'S 48.5% RV FAY HOGAN TOD'S RV FAY HOGAN TOD'S Q Q Report on operation

15 T O D S G r ou p Q u a r t er l y R e p o r t M a r c h 3 1 s t, Q Finally, the ROGER VIVIER brand had revenues of 3.9 million euro in Q1 2009, or 1.9% of consolidated sales, down 1.2 million euro from Q Shoe sales the Group s core business remained strong, and demand for this particular product category was the strongest of any at this particular time. During Q1 2009, shoe revenues totalled million euro, up 11% from Q Sales of leather goods and accessories totalled 31.6 million euro in Q The 12.4% drop from the same period of 2008 also reflects the greater success of certain (In euro mn) Q % Q % Change % Shoes Leather goods (4.4) (12.4) Apparel Other Total Leather goods 15.7% Apparel 12.3% Shoes 71.9% Apparel Leather goods Shoes Apparel Leather goods Shoes Q Q iconic products in the handbag segment, but at a lower average price, on which the Group has focused over the past several months (e.g. the Pashmy line and the fabric G-Bag). Apparel revenues totalled 24.8 million euro in Q1 2009, up 2.2% from the same period of the previous year. As expected, all Group s brands have confirmed their great success on the domestic market, holding on to their leadership in the various merchandise segments. Revenues in Italy totalled million euro in Q1 2009, up 16.2% from the same period of Elsewhere in Europe, Group s sales were down slightly (-4.8%) to 46.5 million euro. Results on the American market, which ac- (In euro mn) Q % Q % Change % Italy Europe (2.3) (4.8) North America (3.0) (21.6) RoW (0.5) (1.9) Total Italy 57.9% Europe 23.1% RoW 13.6% North Am. 5.5% RoW North. Am. Europe Italy RoW North. Am. Europe Italy Q Q Report on operations

16 count for 5.5% of Group s sales, with million euro, reflect the persistent revenues of 11.0 contraction in consumer spending in the United States, caused in turn by the severe recession there. In the Rest of the World,revenues totalled 27.3 million euro in Q1 2009, down slightly from the same period a year earlier. O p e r a t i n g r e s u l t s. The indicators of profitability EBITDA and EBIT, were both up in Q as compared with the first three months of the previous year. (In euro 000 s) Q Q FY 08 Revenues Sales revenues 201, , ,553 Other evenues and income 4,235 3,207 14,772 Total revenues 205, , ,325 Operating costs Change in invent. of work in progr. and finished goods (11,403) 5,838 20,542 Costs for raw materials, supplies and material for cons. (44,298) (51,929) (180,465) Costs for services (58,402) (63,296) (236,402) Costs for use of third party assets (12,730) (10,277) (44,473) Costs of labour (28,218) (25,691) (104,597) Other operating charges (4,793) (5,025) (20,726) Total operating costs (159,844) (150,380) (566,121) EBITDA 45,668 43, ,204 Amortization, depreciation and write-downs Amortization of intangible assets (1,737) (1,443) (6,611) Depreciation of tangible assets (5,971) (5,078) (22,509) Other adjustments Total amortization, depreciation and write-downs (7,708) (6,521) (28,878) Provisions (51) - (725) EBIT 37,909 37, ,601 EBITDA for the period was 45.7 million euro, for a consolidated ROS of 22.7%. In Q1 2008, EBITDA was 43.7 million euro, with a return on sales of 22.9%. On a comparable exchange rate basis, EBITDA would rise to 47.7 million euro, with consolidated ROS of 23.8%. In absolute terms, growth would be 3.9 million euro from the same period of The cost structure did not change significantly: consistently with the trend for FY 2008, costs in Q rose for lease of the locations used by the directly operated store (DOS) network, which was 47.7 Q comp. ex. rates basis EBITDA (in euro mn) Q Q Report on operation

17 the effect of growth in the number of stores (following new openings) from Q1 2008, and the renewal of several expiring leases. The growth in personnel costs was tied to development of the distribution network and systematic evolution in payroll dynamics. Aggregate personal costs for the period were 28.2 million euro, as compared with 25.7 million in Q At March 31 st 2009, the cost of labour was 14.0% of revenues (13.5% in Q1 2008). At the same date, the Group had 2,838 employees, or 24 and 174 persons more than at December 31 st 2008 and March 31 st 2008, respectively. Net of Euro 7.7 million euro in amortisation and depreciation costs, Q EBIT was 37.9 million euro, for a consolidated ROS of 18.8% (37.2 million euro in 2008, or 19.5% of consolidated sales) EBIT (in euro mn) On a comparable exchange rate basis, EBIT would be 40.1 million euro, with ROS of 20.0%. In absolute terms, compared with the first three months of 2008, growth would be 2.9 million euro (+7.8%). Q comp. ex. rates basis Q Q Capital expenditure. Consistently with the strategy adopted in response to the current volatility on international markets, the Group is prudently targeting its capital expenditures in view of streamlining the use of available resources as much as possible, although the Group s traditionally solid cash position remains strong, as illustrated below.investments of resources, which totalled 6,1 million euro in Q (Q1 2008: 12.0 million euro), were concentrated in certain projects deemed strategic or that could not be delayed, principally on the DOS network (approximately 3.5 million). The most important capital expenditures were made at the flagship stores in Paris and New York (soft restyling) and the principal retail outlet in Singapore, whose sales space was expanded significantly. INVESTMENTS BY ALLOCATION Other 15% Prod. 21% DOS 64% 15 Report on operation

18 Net financial position. At March 31 st 2009, net cash and cash equivalents totalled 56,4 million euro, up slightly from March 31 st 2008, when the value of financial resources was 53.5 million euro. At December 31 st 2008 the net financial position was 72.8 million euro, and was composed of million euro in assets and 28.5 million euro in liabilities. Net financial position (in euro 000 s) Change Current financial assets 76,608 Cash and cash equivalents 85, ,276 (15,989) 76,608 Cash 85, ,276 (15,989) Current financial liabilities (11,423) Current account overdraft (19,098) (18,651) (447) (1,482) Current share of medium-long tern financing (1,454) (1,454) - (12,905) Current financial liabilities (20,552) (20,105) (447) 63,703 Current net financial position 64,735 81,171 (16,436) Non-current financial liabilities (10,228) Financing (8,340) (8,340) - (10,228) Non-current financial liabilities (8,340) (8,340) - 53,475 Net financial position 56,395 72,831 (16,436) The contraction in liquidity during Q1 was normal, reflecting the typical financial dynamics of operations during that period. The first several months of the year are characterised by the investment of resources to finance the temporary increase in net working capital, which was accounted for by exposure to third parties customers during the period in question, stemming from the wholesale component of revenues. Net working capital (in euro 000 s) Change Inventories 228, ,076 (13,399) Trade receivables 170, ,386 62,210 Trade payables (114,684) (113,114) (1,570) Net working capital 284, ,348 47,241 At the financial level, the FY 2008 dividend coupon is scheduled to be paid on May 18 th, as approved by the Shareholders Meeting of the parent company TOD S S.p.a. on April 20 th The dividend, totalling 38,261, euro, at the rate of 1.25 (one and 25/100) euro for each of the 30,609,401 shares comprising the share capital at the payment date (as determined following the exercise of options upon expiration of the stock options plan), will be paid to all shareholders entered on the Register of Shareholders at the coupon payment date. 16 Report on operation

19 Significant events occurring after the end of the period There have not been any significant operating events affecting Group s activities since March 31 st The Stock Options Plan for directors, employees and independent contractors approved by the TOD S s.p.a. Board of Directors in 2005 to promote their loyalty over the medium term ended in April, upon conclusion of the last exercise period. Following exercise of the remaining options, another 128,481 shares were subscribed at a par value of 2 euro each, raising the share capital of TOD S s.p.a. to 61,218,802 euro. Business outlook The results for Q were positive and confirmed the Group s operating flexibility and solidity and appeal that its brands have on the market and consumers. However, the economic situation remains particularly difficult. Although timid signs of recovery can be detected, they still do not offer clear and reliable indications of what to expect. Once again, given the uncertain outlook for operations during this year, the Group s management confirms its commitment to maintaining and consolidating its market share and profitability. Guidelines for preparation of the Quarterly Report The TOD S Group Quarterly Report on Operations at was prepared pursuant to Article 154 ter (5) of the Consolidated Law on Financial Intermediation ( TUF ) introduced by Legislative Decree 195/2007, in implementation of Directive 2004/109/EC (the Transparency Directive ). The consolidated financial statements were approved by the Board of Directors of TOD S S.p.a. on May 13 th, 2009, and on the same date that body authorized its publication. Accounting policies The accounting policies applied to prepare the financial figures reported on the Quarterly Report at was prepared by applying IAS/IFRS, issued by IASB and approved by the European Union at the reporting date. IAS/IFRS refers to the International Accounting Standards (IAS), International Financial Reporting Standards (IFRS), and all interpretative documents issued by the IFRIC (previously called the Standing Interpretations Committee). 17 Report on operation

20 The same accounting standards used to prepare the consolidated financial statements at December 31 st, 2008 were used to prepare this Report. Preparation of the financial figures reported on the Quarterly Report at entails making estimates and assumptions based on the management s best valuation. If these estimates and assumptions should change in future from the actual circumstances, they will obviously be modified for the period in which those circumstances changed. Specifically in regard to determination of eventual impairment losses affecting fixed assets, complete tests are performed only when the annual report is prepared, when all information as might be necessary is available, unless there are indications that require immediate valuation of eventual impairment losses or the occurrence of events that required repetition of the procedure. The rates applied for translation of the financial statements of subsidiaries using a functional currency other than the currency used for consolidation, are illustrated in the following table and compared with those used in the previous period: Jan.-Mar Jan.-Mar Exch. Rate at Average Exch. Rate at Average Base March 31 st exch. rate March 31 st exch. rate U.S. dollar UK pound sterling Swiss franc HK dollar Japanese Yen Hungarian forint 1, Singapor dollar Korean WON 1, Chinese renminbi Indian Rupia Macao Pataca Alternative indicators of performances In order to strip the effects of changes in exchange rates from the average values of the first three months of 2008 from the results for the three months of 2009, the typical economic indicators (Revenues, EBITDA, EBIT) have been recalculated by applying the average exchange rates for the three months of 2008, thereby rendering them fully comparable with those of the previous period. 18 Report on operation

21 However, it should be pointed out that these principles for measuring corporate performance represent a method of interpreting results that is not envisaged in IAS/IFRS, while they must not be considered substitutes for the results calculated according to those principles. Furthermore, although the aggregate annual sales of the TOD S Group are not subject to severe seasonal or cyclical variations in aggregate annual sales, its revenues and costs do fluctuate from quarter to quarter, largely in tandem with changes in the volumes of its industrial activity. For this reason, analysis of the interim operating results and financial indicators (revenues, EBITDA, EBIT, financial position and working capital) cannot be considered fully representative, and it would be incorrect to consider the period indicators referred to in this report as proportionate to the whole year s results. Scope of consolidation There was no change in the consolidation scope compared to 2008 Financial Statements and Quarterly Report at March 31 st, 2008 Transactions with related parties In the first three months of 2009, the TOD S Group participated in a number of transactions with parties that have an interest in the Group itself (mainly directors). These transactions, which were all exclusively in the Group s interest, were carried out by applying contractual conditions that would theoretically be applied in an arm s length transaction, in compliance with the governance rules aimed at assuring their regularity, transparency, and substantial fairness. The principal object of transactions with related parties was the sale of products, lease of spaces for retail outlets, show rooms, and offices, the user license for the Roger Vivier brand, provision of advertising services. The following table illustrates the details of these transactions: the transactions amongst Group s companies included in the scope of consolidation were eliminated from the consolidated financial statements, and thus they are not shown in these notes. i. Commercial transactions with unconsolidated subsidiaries Receivables and payables (In euro 000 s) Receivables Payables Receivables Payables Special Purpose Entities Report on operation

22 ii. Commercial transactions with other related entities Revenues and costs (In euro 000 s) Q Q Costs Revenues Costs Revenues Selling products Roger Vivier Paris S.a.s Ordinar y leases Immobiliare De.Im. S.r.l. 1, Difran S.a.s. 51 Holpaf BV 1, User license contract Roger Vivier Gousson - Consultadoria & Mark. Lda 325 2, ,717 Advertising ser vices Forma Pura S.r.l Total 3,543 2,741 2,744 2,203 iii. Commercial transactions with other related entities receivables and payables (In euro 000 s) Receivables Payables Receivables Payables Roger Vivier Paris S.a.s Immobiliare De.Im. S.r.l Difran S.a.s Holpaf BV 7 6 Gousson - Consultadoria & Mark. Lda 8,159 1,059 7,887 1,429 Forma Pura S.r.l Total 9,033 2,690 9,126 2,351 Milan, May 13 th, 2009 The Chairman of the Board of Directors Diego Della Valle Declaration pursuant to Article 154bis( 2) of the Consolidated Law on Financial Intermediation The manager charged with preparing the company s financial reports certifies, pursuant to Article 154bis(2) of the Consolidated Law on Financial Intermediation, that the accounting information presented in this document corresponds to the accounting documents, books, and ledger entries. The manager charged with preparing the company s financial reports Rodolfo Ubaldi 20 Report on operation